I.

Date:
December 13, 2019

II. Objectives:
 To know about the different ways companies compete and why some firms do a
very good job competing.
 To know how effective strategies can lead to competitive organizations.
 To know what productivity is, why is it important, and what organizations can do
to improve it.
 To understand the terms that are widely use in business organizations.

III. Discussion:

Business environments are battlefields, and business organizations are

engaged in combat. There is no uncertainty on the veracity of competition or
‘engagement’ in a business environment. One only needs to walk inside a mall, or
simply surf the Net to prove the business atmosphere skirmishes.
To be able to wage a war, business organizations must be competitive, strategic,
and productive. To conquer or to be conquered? Who will be triumphant in this
battle? In this world of business where competition is everywhere, unleash your
swords and shields, and be the commander, not the soldier.

Competitiveness
The primary goal of every company is having to gain profit with what they sell and
offer to customers. So, in order to obtain that goal, they must perform well on the
industry and gain an edge over its competitors.

Business organizations compete through some combination of their marketing

and operating functions.

Ways on how marketing influences competitiveness:

Identifying consumer wants and/or needs. It involves research and development

in order to fulfill the companies’ goal, which is to gain profit. It constitutes planning
and organizing to further develop competitiveness in the industry.

Pricing. It is a key factor in consumer buying decisions. The companies must

identify the purchasing power of the customers in order to assess on what should be
the best price that can help contribute the company on gaining profit.

Advertising and promotion. With the usage of advertising and promotion, it can
attract customers to buy those products and can also persuade other customers
using the word-of-mouth marketing.

Ways on operations that can influence competitiveness:

Product and service design. Special characteristics and features can be a key
factor in consumer buying decisions. Nowadays, consumers want something unique
that can satisfy their needs and wants pertaining to the products they want to avail.
Cost. Cost associates with productivity. Companies with high productivity rates than
their competitors have a competitive cost advantage. And also, they want to incur
lower cost on producing the product and services that can constitutes a high
profitability.

Location. Location is very vital in companies especially on retail sector. If the retailer
locates near suppliers, it can result in lower transportation costs and can be
delivered quickly.

Quality. The higher the quality, the more the possibility that customers are willing to
pay more.

Quick response. It is the act of quickly bringing the new products or services to the
market to attract more customers. And also, it is the act of quickly delivering the
product and services to the customer after they order and get their feedback and
complains.

Flexibility. This is the ability to respond to changes. There will be time wherein the
competitors will also adapt to the changes that can override your business. So that in
order to gain a competitive edge over the competitors, the management must plan
another feature that can attract customers.

Inventory management. Determining what number of supplies is vital in the

company in order to align it with the demands of the customers.

Supply chain management. It involves the coordination between the internal and
external operations to achieve a quick delivery of goods in the system.

Service. This involves the after-sale activities customers perceive. The business
with high service quality rate tends to be more profitable and grow faster than other
competitors.

Managers and workers. Companies must gain a positive environment within the
organization. They must be highly competent and motivated in order to produce a
high level of productivity in the business. Every member of the business can be a
factor on what the future holds on the company.

Why some organizations fail?

Organizations fail, or perform poorly, for a variety of reasons. Being aware of
those reasons can help managers avoid making similar mistakes. Among the chief
reasons are the following:

1. Putting too much emphasis on short-term financial performance at the

expense of research and development.
The companies must able to look on the long-term aspect of the business. They
must set their goals based on long term aspect and don’t put too much emphasis
on short term financial performance of the company.

2. Failing to take advantage of strength and opportunities, and/or failing to

recognize competitive threats.
 Companies tend to produce goods and offer services without identifying their
capabilities as a business. They must use the SWOT Analysis in order to achieve
the results they wanted.

3. Neglecting operations strategy.

Some companies tend to neglect the strategy the company have that may result
to the less level of competitiveness in the industry.

4. Placing too much emphasis on product and service design and no enough
on process design and improvement.
Some companies tend to plan well about their product but lack on the execution
of it.

5. Neglecting investments in capital and human resources.

Investment in capital can increase the funds of the company. While human
resources can increase the productivity of the company. If these two will be
neglected, it can cause several issues on the company that may result conflict.

6. Failing to establish good internal communications and cooperation among

different functional areas.
Communication and coordination are vital factors on the business. Without the
presence of it, several misinterpretations and improper disclosure of information
can happen.

7. Failing to consider customer wants and needs.

Failing to adapt to the ever-changing environment can cause the depletion of the
company. It happens when the level of competitiveness is very low that they can’t
able to satisfy the customers’ wants and needs.

2 issues that must be addressed to meet customer expectations:

 What do consumers want?
 What is the best way to satisfy those wants?

Strategy
Strategies are plans for achieving organizational goals. It is a set of policies,
procedures and approaches to business that produce long-term success. It must be
designed to support the organization's mission and its organizational goals.

Mission and Goals

An organization's mission is the reason for its existence. It is expressed in its
mission statement, which states the purpose of an organization and should answer
the question "What business are we in?"
Organizational goals provide more detail and describe the scope of the mission.
It serves as a foundation for the development of organizational strategies. The
mission and goals often relate to how an organization wants to be perceived by the
general public, and its employees, suppliers, and customers.
Examples of selected company mission or vision statements:
 Nike - "To bring inspiration and innovation to every athlete in the world."
 Jollibee - "To serve great tasting food, bringing the joy of eating to everyone."
 The overall relationship that exists from the mission down to actual operations is
hierarchical.

Strategies and Tactics

If you think of goals as destinations, then strategies are the roadmaps for
reaching the destination. Generally speaking, organizations have overall strategies
called organizational strategies, which relate to the entire organization. They also
have functional strategies, which relate to each of the functional areas of the
organization. Those functional areas are finance, marketing and operations.

Tactics are the methods and actions used to accomplish strategies. They are
more specific than strategies, and they provide guidance and direction for carrying
out actual operations, which need most specific and detailed plans and decision
making in an organization. You might think of tactics as the "how to" part of the
process and operations as the actual "doing" part of the process.

Angelika Cariaga is a high school student in the Philippines. She would like to
have a career in business, have a good job, and earn enough income to live
comfortably.

A possible scenario for achieving her goals might look something like this:
Mission: Live a good life.
Goal: Successful career, good income.
Strategy: Obtain a college education.
Tactics: Select a college and a major; decide how to finance college.
Operations: Register, buy books, take courses, study.

Planning and decision making are hierarchical in organizations.

Here are some examples of different strategies an organization might choose

from:

Low Cost. Outsource operations to third-world countries that have low labor costs.
In the Philippines, many Chinese have their business operations here because we
have low labor costs.
Scale-based strategies. Use capital-intensive methods to achieve high output
volume and low unit costs. The use of technology makes the products or services
done more efficiently.

Specialization. Focus on narrow product lines or limited service to achieve higher

quality.

Flexible operations. Focus on quick response and/or customization. For example,

Burger King's "Have it your way"

High Quality. Focus on achieving higher quality than competitors. Sony TV and
Five-star hotels are some example of high-quality products and services.

Service. Focus on various aspects of service. One great example of this is

amusement park such as Enchanted Kingdom.

Sustainability. Focus on environmental-friendly and energy-efficient operations. For

instance, Jollibee uses paper cups instead of plastics and they have delivery option
which is energy-efficient for the customers.

Generally speaking, strategy formulation takes into account the way

organizations compete and a particular organization's assessment of its own
strengths and weaknesses in order to take advantage of its distinctive
competencies— those special attributes or abilities possessed by an organization
that give it a competitive edge. The most effective organizations use an approach
that develops distinctive competencies based on customer needs as well as on what
the competition is doing.

Strategy Formulation
Strategy formulation is the process by which an organization chooses the most
appropriate courses of action to achieve its defined goals. This process is essential
to an organization’s success, because it provides a framework for the actions that
will lead to the anticipated results. Strategic plans should be communicated to all
employees so that they are aware of the organization’s objectives, mission, and
purpose.

To formulate an effective strategy, senior managers must take into account

the distinctive competencies of the organizations and they must scan the
environment. They must determine what competitors are doing, or planning to do,
and take that into account. They must critically examine other factors that could have
either positive or negative effects. This is referred to as the well-known marketing
tool of the SWOT analysis.

Strengths and weaknesses are internal factors; opportunities and threats

are external factors; When developing a competitive strategy, it is vital for an
organization to be fully aware of its internal strengths and how those strengths relate
to the competition. These strengths should be maximized and leveraged to the
company’s advantage as well as highlighted in all business and marketing activities
that the company undertakes. On the other hand, it is equally important for an
organization to take an honest look at its areas of weakness. This is where a
company can become vulnerable to outside market conditions, such as competitive
gains, advances in technology, economic shifts, and other factors. By identifying
areas in need of improvement and taking steps to remedy those areas, a company
will be in a stronger competitive position.

In formulating a successful strategy, organizations must take into account both

order qualifiers and order winners. The terms were coined by Terry Hill, professor
at the London Business School. Order qualifiers are described as those
characteristics that potential customers perceive as minimum standards of
acceptability for a product to be considered for purchase. However, it may not be
sufficient to get a potential customer to purchase from the organization. Order
winners are those characteristics of an organization's goods or services that cause
them to be perceived as better than the competition.

Characteristics such as price, delivery reliability, delivery speed, and quality can
be order qualifiers or order winners. Thus, quality may be an order winner in some
situations, but in others only an order qualifier. It is important to determine the set of
these characteristics and necessary to decide on the relative importance of each
characteristic so that appropriate attention can be given to the various
characteristics.

Environmental scanning is the considering of events and trends that present

either threats or opportunities for the organization. The purpose of the scan is the
identification of opportunities and threats affecting the business for making strategic
business decisions. As a part of the environmental scanning process, the
organization collects information regarding its environment and analyzes it to
forecast the impact of changes in the environment

The following are key external factors:

1. Economic conditions. These include the general health and direction of the
economy, inflation and deflation, interest rates, tax laws and tariffs.

2. Political conditions. These include favorable or unfavorable attitued towards

business, political stability or instability, and wars.

3. Legal environment. This includes antitrust laws, government regulations, trade

restrictions, minimum wage laws, product liability laws and recent court
experience, labor laws, and patents.

4. Technology. This can include the rate at which product innovations are occuring,
current and future process technology and design technology.

5. Competition. This includes the number and strength of competitors, the basis of
competition (price, quality, special features), and the ease of market entry.

6. Markets. This includes size, location, brand royalties, ease of entry, potential for
growth, long term stability, and demographics.
 The organization also must take into account various internal factors that relate to
possible strengths or weaknesses. Among the key internal factors are the following:

1. Human resources. These include the skills and abilities of managers and
workers: special talents (creativity, designing, problem solving); loyalty to the
organization; expertise; dedication; and experience.

2. Facilities and equipment. Capacities, location, age, and cost to maintain or

replace can have a significant impact on operations.

3. Financial resources. Cash flow. access to additional funding, existing debt

burden, and cost of capital are important considerations.

4. Customers. Loyalty, existing relationships, and understanding of wants and

needs are important.

5. Products and services. These include existing products and services, and the
potential for new products and services.

6. Technology. This includes existing technology, the ability to integrate new

technology, and the probable impact of technology on current and future
operations.

7. Suppliers. Supplier relationships, dependability of suppliers, quality, flexibility,

and service are typical considerations.

8. Others. Other factors include patents, labor relations, company or product image,
distribution channels, relationships with distributors, maintenance of facilities and
equipment, access to resources, and access to markets.

After assessing internal and external factors and an organization's distinctive

competence, a strategy or strategies must be formulated that will give the
organization the best chance of success.

Organization may decide to have a single, dominant strategy or to have

multiple strategies. Particularly, a single strategy would allow the organization to
focus and concentrate on one particular strength or market condition. On the other
hand, multiple strategies may be needed to address set of conditions.

Outsourcing is an example of a business strategy that many companies are

using to reduce overhead, gain flexibility, and take advantage of suppliers' expertise.
Dell Computers provides a great example of the potential benefits of this strategy.
Developing a strategy is only effective if it is put into place. Companies increase risk
of failure not only by missing or incomplete strategies, they also fail due to poor
execution of strategies. In addition, there are also factors that are beyond their
control, such as natural or man-made disasters, major political or economic
changes, or competitors have an overwhelming advantage.
 Sustainability Strategy
Since businesses aim to be successful, the use of coherent sustainability
strategy that raises sustainability to the level of corporate governance and sets goals
for the design and delivery of products and services became their major need. The
strategy should encompass supply chain operations and metrics. Executive
appraisal is linked to the attainment of sustainability goals.

Global Strategy
Globalization brought companies into issues difficult to deal with. One of the
issues was that what works in one country will not work in other countries. This
made them think of more careful and well-crafted strategies. Aside from this, the
threat of political and social upheaval, difficulty of coordinating or managing
far-flung operations are also the issues businesses are facing today.

Operations Strategy
Operations strategy is the approach, consistent with the organization strategy,
that is used to guide the operations function. Comparing to organization strategy,
operations strategy is narrower in scope, dealing primarily with the operations aspect
of the organization. This strategy relates to products, processes, methods, operating
resources, quality, costs, lead times and scheduling.
Organization and operations strategy should not be formulated independently. It
is important that the two links in determining the strengths and weaknesses―
capitalizing the strengths and dealing with weaknesses. By this, operations strategy
must be consistent with the overall strategy of the organization and with all the
functional units of the organization. It means that the senior managers work with
functional units to formulate strategies that will support than conflict with, each other
and with the overall strategy of the organization.

Comparison of Mission, Organization Strategy, and Operations Strategy

Management Time Scope Level of Relates to

Level Horizon Detail
The overall Mission Top Long Broad Low Survival,
organization profitability
Production/ Strategy Senior Long Broad Low Growth rate,
operations market share
Strategic Senior Moderate to Broad Low Product design,
long choice of location,
choice of
technology, new
facilities
Tactical Middle Moderate Moderate Moderate Employment levels,
output levels,
equipment
selection, facility
layout
Operational Low Short Narrow High Scheduling
personnel,
adjusting output
rates, inventory
management,
purchasing
 Strategic Operations Management Decision Areas

Decision Area What the Decisions Affect

Product and service design Costs, quality, liability and environmental issues
Capacity Cost structure, flexibility
Process selection and layout Costs, flexibility, skill level needed, capacity
Work design Quality of work life, employee safety, productivity
Location Costs, visibility
Quality Ability to meet or exceed customer expectations
Inventory Costs, shortages
Maintenance Costs, equipment reliability, productivity
Scheduling Flexibility, efficiency
Supply chains Costs, quality, agility, shortages, vendor relations
Projects Costs, new products, services, or operating
systems

Quality-based strategies

It focuses on maintaining or improving the quality of an organization's products or

services. Quality seems to be a factor in both attracting and retaining customers.
This strategy can reflect an effort to overcome an image of poor quality, a desire to
catch up with the competition, a desire to maintain an existing image of high quality
or some combination of these and other factors. Quality-based strategy can be part
of another strategy such as cost reduction, increased productivity, or time, all which
benefit from higher quality.

Time-based strategies

It focuses on reducing the time required to accomplish various activities. By this,

organizations tend to improve service to the customer and to benefit like advantages
over rivals who have more time to accomplish such tasks. The main function of time-
based strategies is to reduce the time allotted to conduct the various activities in
process. By reducing time, costs are generally less, productivity is higher, quality
tends to be higher, product innovations appear in the market and customer service is
improved.

In terms of reduction, organizations have to achieve it through the following:

1. Planning time. Time needed to react to a competitive threat, to develop

strategies and select tactics, to approve proposed changes to facilities, to adopt
new technologies and so on.

2. Product/service design time. The time needed to develop and market new or
redesigned products or services.

3. Processing time. The time needed to produce goods and provide services. This
can involve scheduling, repairing equipment, methods used, inventories, quality,
training and the like.

4. Change over time. The time needed to change from producing one type of
product or service to another. This may involve new equipment settings and
attachments, different methods, equipment, schedules or materials.

5. Delivery time. The time needed to fill others.

 6. Response time for complaints. These might be customer complaints about
quality, timing of deliveries, and incorrect shipments. These might also be
complaints from employees about working conditions.

Agile operations is a strategic approach for competitive advantage that

emphasizes the use of flexibility to adapt and prosper in an environment of change.
Agility involves a blending of several distinct competencies such as cost, quality, and
reliability along with flexibility. Processing aspects of flexibility include quick
equipment changeovers, scheduling and innovation. Process or product aspects
include varying output volumes and product mix.

Productivity
Productivity is an index that measures output (goods and services) relative to
the input (labor, materials, energy, and other resources) used to produce them.

𝑂𝑢𝑝𝑢𝑡
Productivity= 𝐼𝑛𝑝𝑢𝑡

In business organizations, productivity ratios are used for planning workforce

requirements, scheduling equipment, financial analysis, and other important tasks.

Productivity growth is the increase in productivity from one period to the next
relative to the productivity in the preceding period.

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦−𝑃𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦

Productivity growth= 𝑃𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦
× 100

For example, if productivity increased from 80 to 84, the growth rate would be

84−80
Productivity growth= 80
× 100 = 5%

Computing Productivity
Productivity measure can be based on a single input (partial productivity), on
more than one input (multifactor productivity), or on all inputs (total productivity).

The choice of productivity measure depends primarily on the purpose of the

measurement. If the purpose is to track improvements in labor productivity, then
labor becomes the obvious input measure.

Some examples of different types of productivity measures.

Partial measures 𝑶𝒖𝒑𝒖𝒕 𝑶𝒖𝒑𝒖𝒕 𝑶𝒖𝒑𝒖𝒕 𝑶𝒖𝒑𝒖𝒕

𝑳𝒂𝒃𝒐𝒓 𝑴𝒂𝒄𝒉𝒊𝒏𝒆 𝑪𝒂𝒑𝒊𝒕𝒂𝒍 𝑬𝒏𝒆𝒓𝒈𝒚
Multifactor measures 𝑂𝑢𝑝𝑢𝑡 𝑂𝑢𝑝𝑢𝑡
𝐿𝑎𝑏𝑜𝑟+𝑀𝑎𝑐ℎ𝑖𝑛𝑒 𝐿𝑎𝑏𝑜𝑟+𝐶𝑎𝑝𝑖𝑡𝑎𝑙+𝐸𝑛𝑒𝑟𝑔𝑦
Total measure 𝐺𝑜𝑜𝑑𝑠 𝑜𝑟 𝑠𝑒𝑟𝑣𝑖𝑐𝑒𝑠 𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑
𝐴𝑙𝑙 𝑖𝑛𝑝𝑢𝑡𝑠 𝑢𝑠𝑒𝑑 𝑡𝑜 𝑝𝑟𝑜𝑑𝑢𝑐𝑒 𝑡ℎ𝑒𝑚
Determine the productivity for these cases.

1. Four workers installed 720 square meters of carpeting in eight hours.

𝑀𝑒𝑡𝑒𝑟𝑠 𝑜𝑓 𝑐𝑎𝑟𝑝𝑒𝑡 𝑖𝑛𝑠𝑡𝑎𝑙𝑙𝑒𝑑

Productivity= 𝐿𝑎𝑏𝑜𝑟 ℎ𝑜𝑢𝑟𝑠 𝑤𝑜𝑟𝑘𝑒𝑑

720 𝑠𝑞𝑢𝑎𝑟𝑒 𝑚𝑒𝑡𝑒𝑟𝑠

=4 𝑤𝑜𝑟𝑘𝑒𝑟𝑠×8 ℎ𝑜𝑢𝑟𝑠/𝑤𝑜𝑟𝑘𝑒𝑟

720 𝑚𝑒𝑡𝑒𝑟𝑠
= 32 ℎ𝑜𝑢𝑟𝑠

=22.5 meters/hour

2. Output: 7,040 units

Input:
Labor: $1,000
Materials: $520
Overhead: $2,000

𝑂𝑢𝑡𝑝𝑢𝑡
Productivity=𝐿𝑎𝑏𝑜𝑟+𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙𝑠+𝑂𝑣𝑒𝑟ℎ𝑒𝑎𝑑

7,040 𝑢𝑛𝑖𝑡𝑠
=$1,000+$520+$2,000

=2 units per dollar input

In essence, productivity measurements serve as scorecards of the effective

use of resources.

Why are business leaders concerned with productivity?

For an individual department or organization, productivity measures can be used
to track performance over time. This allows managers to judge performance and to
decide where improvements are needed.
For companies, a higher productivity relative to their competitors gives them a
competitive advantage in the marketplace. With a higher productivity, they can afford
to undercut competitors’ prices to gain market share or charge the same prices but
realize greater profits.
For an industry, higher relative productivity means it is less likely to be
supplanted by foreign industry.

Why are government leaders concerned with productivity?

High levels of productivity are largely responsible for the relatively high standards
of living enjoyed by people in industrial nations. Furthermore, wage and price
increases not accompanied by productivity increases tend to create inflationary
pressures on a nation’s economy.

Productivity in the Service Sector

Service productivity is more problematic than manufacturing productivity. In
many situations, it is more difficult to measure, and thus to manage, because it
involves intellectual activities and a high degree of variability. Think about medical
diagnosis, surgery, consulting, legal services, customer service, and computer repair
work.

A useful measure closely related to productivity is process yield.

Where products are involved, process yield is defined as the ratio of output of
good product to the quantity of raw material input.
Where services are involved, process yield measurement is often dependent on
the particular process. For example, in a car rental agency, a measure of yield is the
ratio of cars rented to cars available for a given day.

Factors that Affect Productivity

Generally, they are methods, capital, quality, technology, and management.
Other factors that affect productivity include the following:

Standardizing processes and procedures wherever possible to reduce variability.

Quality differences may distort productivity measurements. One way this can
happen is when comparisons are made over time, such as comparing the
productivity of a factory now with one 30 years ago.

Use of the Internet can lower costs of a wide range of transactions, thereby
increasing productivity.

Computer viruses can have an immense negative impact on productivity.

Searching for lost or misplaced items wastes time, hence negatively affecting
productivity.

Scrap rates have an adverse effect on productivity, signaling inefficient use of

resources.

New workers tend to have lower productivity than seasoned workers. Thus, growing
companies may experience a productivity lag.

Safety should be addressed. Accidents can take toll on productivity.

A shortage of information technology workers and other technical workers

hampers the ability of companies to update computing resources, generate and
sustain growth, and take advantage of new opportunities.

Layoffs often affect productivity. Initially, productivity may increase after a layoff.
However, as time goes by, the remaining workers may experience an increased risk
of burnout, and they may fear additional job cuts. The most capable workers may
decide to leave.

Labor turnover has a negative effect on productivity; replacements need time to get
up to speed.

Design of the workspace can impact productivity. For example, having tools and
other work items within easy each can positively impact productivity.
 Improving Productivity
1. Develop productivity measures for all operations. Measurement is the first step in
managing and controlling an operation.

2. Look at the system as a whole in deciding which operations are most critical. It is
overall productivity that is important. For example, if a company is able to
increase its output trough productivity improvements, but then is unbale to sell
the increased output, the increase in productivity isn’t effective.

3. Develop methods for achieving productivity improvements, such as soliciting

ideas from workers, studying how other firms have increased productivity, and
reexamining the way work is done.

4. Establish reasonable goals for improvement.

5. Make it clear that management supports and encourages productivity

improvement. Consider incentives to reward workers for contributions.

6. Measure improvements and publicize them.

Efficiency versus Productivity

Efficiency pertains to getting the most out of a fixed set of resources.

Productivity pertains to effective use of overall resources.

For example, an efficiency perspective on mowing a lawn given a hand mower

would focus on the best way to use the hand mower; a productivity perspective
would include the possibility of using a power mower.

IV. References:

Stevenson, W. J., & Sum, C. C. (2010). Operations management: an asian

perspective. Singapore: McGraw-Hill Education (Asia).

Saylor Foundation. (2016). Strategy Formulation. Retrieved from:

https://www.saylor.org/site/wp-content/uploads/2013/09/Saylor.orgs-Strategy-
Formulation.pdf.

Environmental Scanning: Explanation, Components and Factors. (2019, December

9). Retrieved from https://www.toppr.com/guides/commercial-
knowledge/business-environment/environmental-scanning/.